March 2017 - Market Summary
Review of Market Trends
Report No. 3
Martin Rawlings
4/10/2017
Contents
Macro Economics.................................................................................................................................. 2
Oil Market: Brent $52.83/bbl, WTI $50.60/bbl ..................................................................................... 4
European Gas Market NBP Price: 1.3392 pence/kWh ......................................................................... 5
UK Electricity Market Average Buy Price: £40.50/MW ......................................................................... 6
Coal Buy Price: £13.16/tonne ............................................................................................................... 7
Carbon Buy Price: €4.93/tonne  ...................................................................................................... 8
News ..................................................................................................................................................... 8
UK Energy Markets Report
Macro Economics
GBP
Closing Rate
% Change
EUR
1.1660
0.053%

USD
1.2242
0.16%

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UK Energy Markets Report
United States Dollar:
Cable has traded within a narrow range in the past 24 hours. Yesterday morning, we saw data from
the UK construction sector show a slowdown in growth, coming in marginally lower than forecast. A
weaker rise in residential building activity was the main cause along with a marginal increase in new
work contributing to slower employment growth and a slight decline in input buying. Focus shifted to
the US after this release, for the next set of data releases, coming in the form of trade balance numbers
and factory orders. Positive US data has been the theme of recent and these numbers didn’t disappoint
as the US trade deficit fell with exports hitting two year highs. US factory orders came in as expected
February with a surge in demand for commercial aircraft. Despite these releases, a narrow range has
been seen for Cable the past 24 hours trading within a 30pip range – low 1.2430 / high 1.2460.
GBP/USD 1.2437 – 9:30am.
Today has been a data heavy with high impact data on both sides of the Atlantic. Services PMI data is
released from the UK at 9:30am and completes the trio of data from the purchasing manager’s index.
Further expansion to the previous 53.3 is expected. This evening, the FED minutes will be eagerly
anticipated, specifically the evolving balance sheet policy and the plan to unwind $4.5 trillion.
I anticipate a range in the GBP/USD rate of 1.2410 – 1.2520
Euro:
Sterling edges lower against the Euro, but volatility has been restrained. UK construction release
yesterday morning and Draghi’s address later in the day both offered little to GBP/EUR. One headline
from Tuesday that wasn’t highlighted in the commentary was the televised debate on the French
election. The far-right National Front Candidate Marine Le Pen spelled out plans to exit the Euro and
the EU last night, which would see a return to the Franc for government bonds. This idealism was
however picked apart by opposition candidates and only highlighted the potential pitfalls with the
plan leading to economic suicide for the French economy. This hasn’t helped Le Pen Presidency
campaign. The currency pair opens within the small range it has traded within Tuesday into
Wednesday. GBP/EUR 1.1650 – 9:30am.
UK services data the only key data release for the currency pair till Thursday. Unless we see a figure
far from the 53.5 expected, I would imagine GBP/EUR will continue its recent trend, shifting within a
60 pip range.
I anticipate a range in the GBP/EUR rate of 1.1620 – 1.1710
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UK Energy Markets Report
Oil Market: Brent $52.83/bbl, WTI $50.60/bbl
Brent ICE (USD/b)
52.83

Gasoil ICE (USD/t)
468.00

Fuel 1% Fob cg (USD/t)
290.80

Close to close at $53.92 bbl for Brent ICE (This morning at $ 52.83/bbl)
Crude prices posted a surprising third positive session in a row yesterday and it is now almost $2/b
gain since Tuesday (+4%). Oil dipped slightly this morning on profit taking after this three days rally
but both benchmarks are back above $50/b this morning. The deal extension is still in the air due to
optimistic Kuwaiti comments yesterday. Markets are still positive after high compliance figures for
OPEC cuts this week and the positive momentum lasts despite some warnings from US indicators.
Main events:
No real events on fundamentals yesterday and markets have in mind that there is a consensus ongoing
among producers on a deal extension. Traders saw in the “neutral” statements from Russia and Iran
this week a step towards the deal extension where some analysts just see an open door to very harsh
negotiations. Nonetheless, that was enough to boost confidence and push prices away from dangerous
supports this week. Market operators therefore see the expected rebalancing as just “temporarily
delayed” due to Russian “gradual” compliance and US output surge but the least we can say is that
this position is optimistic, some would say unrealistic… Yesterday afternoon, Kuwait fueled the
positive sentiment with the Gulf’s emirate’s oil Minister Issam almarzooq telling state-run news
agency KUNA that his country and other producers support prolonging production cuts…
Yesterday, IEA executive director Fatih Birol told Reuters he “does not expect a major increase in
global oil prices despite efforts by OPEC and non- OPEC members to reduce output” mostly because
of “tremendous amount of stocks in the market” and “pressure from other producers”: US but also
Brazil and Canada.
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UK Energy Markets Report
Outlook:
We can expect a technical correction today after the strong 3-days rally. Nevertheless, $52/b now
appears as a technical support for Brent first nearby and this could be the starting point for next week.
European Gas Market NBP Price: 1.3392 pence/kWh
Day Ahead (p/therm)
39.25

April 2017 (p/therm)
39.65

Winter 2017 (p/therm)
46.23

Close to close at 16.77 EUR /MWh for TTF CAL 18 (This morning at 16.68 EUR /MWh)
Closing of short positions ahead of the expiry of some key contracts and bullish oil prices pushed
European gas prices higher again in a volatile session on Thursday despite early losses as the
fundamental context remained rather weak. A sharp fall in the euro against the pound provided
additional support to far-curve contracts traded in euros. Gas demand was particularly low across
Europe on the back of very mild temperatures: UK residential demand fell almost 30% below
seasonal norms yesterday.
NBP ICE April 2017 prices gained 0.85 p/therm at the close (+2.1%), expiring at 40.90 p/th. TTF ICE
April 2017 prices were also higher for their last close: +36 euro cents (+2.3%), to €15.937/MWh.
Further out on the curve, TTF ICE Cal 2018 prices were assessed 38 euro cents higher at the close
(+2.3%) just below their 100-day average, to €16.771/MWh.
The UK system switched to a large oversupply this morning on an increase in Langeled flows (due to
a redirection of exports from the continent to the UK) and a drop in exports to the continent, which
could weigh on NBP spot prices today. Nevertheless, prospects of higher gas demand next week due
to lower temperatures could be supportive but recent gains in prompt contracts could be eroded today
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UK Energy Markets Report
as the bullish move was not backed by strong fundamentals. Early nominations for physical flows on
Monday will be closely watched this afternoon as we’ll switch to the gas summer season tomorrow
with the possibility of significant changes in key supply flows. All in all, we favour a stable to bearish
outlook for European gas prices today.
UK Electricity Market Average Buy Price: £40.50/MW
Day Ahead (p/kWh)
4.050

April 2017 (p/kWh)
Q2 2017 (p/kWh)
Summer 2017 (p/kWh)
Winter 2017 (p/kWh)
4.195
4.115
4.120
4.620




Close to close at EUR 29.70 /MWh for German power CAL 18 (This morning at EUR
29.64/MWh)
Peak power demand should fall near 50 GW this weekend in France according to RTE, a new low for
this year, and a level significantly below last year as mild temperatures should continue to prevail
despite a slight downward revision of temperatures for April and May in some parts of NWE. Nuclear
availability remains low in Germany and in Belgium (reduced by half) but conditions remain overall
stable for this weekend and the start of next week with prices converging in NWE.
On the far curve, the trend was unclear yesterday with a downward correction in the first part of the
day followed by a rebound in the afternoon, after the move in oil prices. At the very end of the day
French power prices surged at above €35/MWh, still currently trading at these levels. That is, besides
the move in clean fuel costs, there might be an increase inherent to French power prices due to the
short squeeze we analysed yesterday but also, and the news was leaked this morning in the French
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UK Energy Markets Report
press, to the fact that EDF and Areva have purposely hidden manufacturing problems for the new
reactor’s tank of Flamanville. If this is confirmed and if actions are taken, there might be delays in
starting the new reactor, initially planned for the end of 2018. This could be bullish for the French
CAL 18 and in particular for the French CAL 19. EDF is also due to decide on the official closing of
Fessenheim on 6 April.
The evolution of coal and emissions prices might be stable to bearish today and in consequence, our
view on the German year-ahead is stable. But French power prices might drag the European complex
slightly to the upside.
Coal Buy Price: £13.16/tonne
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UK Energy Markets Report
Carbon Buy Price: €4.93/tonne 
News
Wirsol completes the connection of 19 solar parks to the UK grid
Wircon subsidiary, Wirsol Energy completed successfully the connection of 19 solar parks with a
total capacity of 105.5MWp across the UK.
Located in England and Northern Ireland, the 19 solar sites have a total capacity from 20.5MWp to
2.5MWp and all are connected under Renewable Obligation Contracts (ROC) ranging from 1.4
Northern Ireland Renewables Obligation Contract (NI-ROC) to 1.2ROC.
The connection was achieved ahead of the March 31st ROC deadline. Wirsol has further plans to go
ahead with solar projects not only in UK, but also in Australia, Netherlands, Spain, France, and
Germany.
The project was financed with the help of publicly-regulated bank BayernLB and the investment
amounts around £88m. BayernLB's has a long tradition and a good reputation in offering long-term
finance within the renewables sector.
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UK Energy Markets Report
European spot power prices spurred by high demand, tighter supply
Crude oil prices evolved differently on Monday, with Brent gaining ground and WTI crude falling
slightly on reports that Iraq would participate in output reduction if OPEC extended oil production
cuts into the second half of the year.
U.S. West Texas Intermediate crude lost 13 cents at $53.20 a barrel. Brent crude rose by 11 cents to
settle at $56.01 a barrel.
Meanwhile, European spot power prices on Monday rallied in the wholesale market, spurred by
forecasts of higher consumption and of declining wind power output in the biggest marketplace,
Germany. German baseload power contract for Tuesday delivery soared 32% at 44.51 euros/MWh
compared with the price paid for Monday delivery. The French equivalent contract climbed 26% at
45.19 euros/MWh.
Along the forward power curve, the benchmark German Cal '18 baseload power contract was down
by 0.13% to 30.45 euros/MWh, while the equivalent French year-ahead contract lost 0.25% at 35.49
euros/MWh. Dec '18 carbon emissions allowances fell 1.95% to 5.53 euros a tonne.
UK's prompt gas prices boosted on Monday on anticipated increase in demand from the generation
sector. British day-ahead gas price rose slightly by 0.12% at 43.3 p/therm. However, April gas
contract eased 0.72% to 42.98 p/therm due to impending liquefied natural gas imports by the end of
the week.
Gazprom to increase its market share in Europe through Wingas expansion
Russian gas giant Gazprom envisages strengthening its sales in Europe, helped by the expansion of its
German subsidiary Wingas.
Gazprom boosted its market share in Europe to 34 percent last year from 31 percent in 2015, despite
the EU’s attempt to diversify its gas supplies and reduce its dependence on Russian gas imports.
Wingas has expanded its presence especially in Austria and the Czech Republic, but also in the
Netherlands, stated Ludwig Moehring, head of sales at Kassel-based Wingas.
Gazprom’s deliveries to Germany soared 21 percent in the first half of January, having hit a high of
49.8 billion cubic metres (bcm) in 2016, which was up 12.5 percent compared with 2015.
Wingas was set up in 1993 by Gazprom and Germany's Wintershall to supply and trade gas.
The Russian group became sole owner of Wingas, a wholesaler with a market share of over 20
percent in Germany, in October 2015 after running it as a joint venture with BASF.
Wingas sells gas to local utilities and industry, and is the second largest supplier to Germany, behind
Uniper, but ahead of RWE and VNG.
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UK Energy Markets Report
Terminology
 All oil prices: in US dollar
 Oil product: Brent crude or West Texas Intermediary (WTI)
 Mb/d – Million Barrels per day.
 Freight rates: US dollar per tonne.
 Natural gas prices quoted as pence per therm.
 Power prices quoted as Pounds Sterling per MWh.
 CO2 market: EURO
Information & Data Sources
1. Total Gas & Power
2. GdF Suez
3. Haven Power
4. Coal spot.com
5. Forex
6. ICIS
Disclaimer
This material is intended for information purposes only. It does not constitute an independent investment
research, a personal recommendation or other general recommendation relating to transactions in financial
instruments or an investment advice.
This material is intended for general distribution, it does not take into account any specific investment
objectives, financial situation or particular needs of any recipient. It cannot be transmitted to any other person
without the prior written consent of Martin Rawlings.
The information contained herein, including any expression of opinion, is not intended to constitute an offer or
a solicitation to buy or sell any financial instruments, products or services, an investment research or an
investment recommendation or other financial, investment, legal, tax or accounting advice or any other advice.
Further, all information contained herein has been obtained from and/or is based upon sources believed to be
reliable is deemed to be clear, fair and not misleading but cannot be guaranteed as to accuracy or
completeness. The views and opinions, forecasts, assumptions, estimates and target prices reflected in this
material are as of the date indicated and are subject to change at any time without prior notice. The figures that
may refer to past performance herein are in no instance an indication of future valuations or future
performance. Martin Rawlings is under no obligation to disclose or to take account of this document when
advising or dealing with or for its customers. Martin Rawlings nor any other person accept any liability to
anyone for any direct, indirect, special, incidental, consequential, punitive or exemplary damages (including,
but not limited to, lost profits) arising from the use and dissemination of this material or the information
contained herein.
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UK Energy Markets Report
Contact me:
T: 01638 780974
E: [email protected]
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